Crazy as It Sounds, It's Time to Buy Beef -- Here's Why

Technicals show it's time to flip to long when it comes to investing in cattle. There are ETF vehicles for doing so.
By Ken Goldberg ,

While most investors don't typically consider allocating capital to the live cattle market, there is a rare opportunity being corralled that warrants a look. Here's the monthly bar chart of the live cattle futures, showing the decline off the 2014 peak has formed an impulsive decline into our decision support engine's green buy box. The DSE uses hunter/seeker pattern recognition algorithms, along with many other indicators, to warn members of our Trading Room and DSE Alerts services when trends in place are likely to reverse. 

If you don't have experience in trading futures, don't fret. There are now ETF's that do the job of mimicking the movements of uncommon investment choices. (MOO) - Get Report , (COW) - Get Report , (UBC)  and (LSTK) are some.

Click here to see the chart in a new window

This is exactly what is happening now. The chart shows the decline in prices, that can be considered at fully complete, with all required subdivisions accounted for. At the same time, notice the long term stochastics are as oversold as they've been since 2009, when the last big bottom in beef took place. From there, prices rose from the 80's to the 170's. 

The DSE can't tell whether or not another doubling in price is about to take place, in the coming five years (like the length of the last rally of this magnitude), but it has developed a high confidence forecast based upon 100 years of chart pattern recognition. The blue arrow highlights the path, which should see live cattle prices rise from the 110 zone toward the 142 +/-10 zone in the next 12 to 24 months. This area will allow a Fibonacci 35% to 62% corrective bounce, which is typical after an impulsive sequence terminates. 

If you are looking for an objective way to play a market that you haven't previously looked at, this is a strong opportunity for upside, if you have the patience to buy in the high 90's to low 100's, and hold for a move that could approximate 40%+ returns in the next year or two. More importantly, if you are a commercial hedger, rancher, or anyone else in need of protecting against big swings in prices of beef, DSE warns that now is not the time to be using selling actions. That is, if you have been smart enough to have hedged this price decline out of your business model, you should be taking hedges off into this price and time window, so you can next benefit from an upcoming price increase. 

We can't begin to speculate on what fundamental events might cause prices to rise like this, but we don't have to. Objective decision support allows for long exposure to be established now, and for short exposure to be covered. Or, at least for protective buy stops to be put into place on a close above 115. 

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These are the kinds of analyses we will be focusing on in our July workshop in Los Angeles, where there are still a few seats available. If you would like to reserve your spot, contact information is available at that link.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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